Startups and big corporations often benefit by teaming up with each other and it has to be a symbiotic relationship that mutually benefits both parties. However, these partnerships are not without their problems. Letting each entity maintain its own identity and independent priorities is difficult, and keeping two very different and yet demanding partners satisfied and contented in a long-term relationship involves a lot of skills and manipulation. Turns out, much of what we know about healthy human romantic relationships can be adapted to apply to these sorts of business partnerships as well. Here are some advice for startups looking for a corporate partner:
Do Not Simply Go For The First Prospect
When looking for a corporate partner, do not be afraid to be choosy. By current statistics, an average of 10 months elapses between the time a corporation and startup meet and the time they formally establish a formal collaboration. Most of that time will be spent on the corporation’s end, performing due diligence as well as getting approval and consent from the rest of the organization but that does not mean startups can not do their own due diligence as well.
Unlike human dating, there is no site with millions of detailed company profiles and sophisticated match algorithms to help you find your perfect corporate partner, but you can still narrow things down by establishing some criteria for the right type of corporate partner your startup is looking for. For instance, most startups want a corporate partner that is relatively easy to work with and does not trap them in complex processes and time-consuming bureaucracy and red tape. Always do some research about the corporate culture and the personalities of key management in these corporations so as to get a more better perspective.
Once you have identified a number of promising matches, your startup need to go on some “dates” that is, some face-to-face meetings to find answers to key questions. For example, how will your product or service be integrated into their corporation? What blank spot do your startup fill? Do you blend with their corporate culture and vision? How will you need to adapt your own processes to integrate with theirs?
Take Into Consideration The Age Gap
Just like the cliché of an older man dating a much, much younger girl, partnering with an organization in a different phase of its business can create difficulties and issues . If you are a very young seed-stage startup, you may be able to help corporates explore nascent industries and technologies, but organizationally your startup may not be mature enough to make a real business impact for your partner.
If your startup is at series A or later, however, you can provide more than mere inspiration. A corporate partner can take your cutting-edge product and market it through their trusted brand and experienced sales team, leading to lucrative value-chain synergy. If the CEO of the corporation concerned has some relationship experience already under his belt, even better; everyone appreciates a romantic partner who knows what he wants. Youth may be dazzling, but as a mid-stage startup, you might actually be more attractive to corporates.
Talking To Each Other Honestly Is Critical
You do not negotiate with your better half the same way you would with a insurance salesman (not if you want to stay together for a long time), and you should not expect your corporate partner to negotiate with you the same way it negotiates with a supplier, either. It should want you, its partner, to grow and be financially stable, so cost-cutting is far from the only goal they should have with your startup.
Startups can urge corporates to keep things “operationally friendly “by keeping payment cycles short, contracts straightforward and policies realistic. Startups and corporations should also decide together which partner “owns” which customer. Startups should keep full ownership of their own intellectual property, and not share it with the corporate partner.
But, while excessive bureaucracy can be an issue, lack of accountability can squash partnerships, too. At some point, startups should insist that someone in the larger organization with P&L responsibility oversees the relationship. The success of the partnership should be integrated into this “owner’s” KPIs as soon as possible in order to ensure they will devote serious resources to the project. Having one point of contact on each side of the partnership also simplifies communication. There need to be clearly defined and agreed upon measurable KPIs so that success can be measured and acknowledged.
Do Not Be Afraid To Ask For A Formal “Marriage”
In every relationship, there comes a point where one has to commit. In romance, that means meeting the parents and setting the wedding date and place. In the world of startup-corporate partnerships, it means signing a formal legal contract that includes a substantial financial commitment from the corporate partner.
That latter is important. Startups should not settle for flowery words or romantic gestures at this stage , it is time to put a diamond ring on it, as it were. Offering $5,000-$10,000 for a proof of concept is not a real commitment; the investment (not necessarily financial, but rather priorities and resources) from the corporate business side has to be significant. If such a proposal is not forthcoming, but you are ready to commit, it is time to sit down with your partner and have a frank discussion about the future. Yes,it can be scary but it is better than being strung along.
Better To Break Away From A Worthless Relationship
How many relationships go on for years on nothing but inertia, conflict avoidance and fear of legal fees? Sometimes it is time to cut your losses and end a partnership.
To minimize the damage, do not let things get to the point where untangling your operations becomes unbearably painful and complicated. Constantly monitor the health of the relationship from the very beginning, looking out for friction points and deciding on dealbreakers in advance. During the honeymoon stage when everything feels right and easy, draw up some worst case scenario paperwork to prevent logistical and operational tanglements that would be extremely hard to undo in the case of a breakup . A prenuptial agreement or exit strategy is always useful. A carefully written partnership agreement can help avoid arguments over who owns IP and other snafus.
A healthy partnership is hard work, but it can also be hugely rewarding. The same is true for startup-corporate pairings. Put in the effort an due diligence to find the right partner and maintain communication and commitment through the inevitable ups and downs, and you will find yourself toasting many happy and profitable years together.